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Governor speaks about rising property taxes

Wednesday, November 14, 2007

Greene County Daily World Assistant Editor Nick Schneider sat down with Gov. Mitch Daniels and other newspaper representatives from Daviess, Martin and Dubois counties Tuesday morning. The governor talked candidly about his property tax relief proposal. Courtesy photo.
WASHINGTON, Ind. -- Gov. Mitch Daniels admits that skyrocketing property tax bills have the attention of many Hoosiers and upset voters went to the ballot boxes last week and voiced dissatisfaction through the electoral process in a non-partisan fashion -- replacing incumbent mayors in several Indiana cities.

"People are unhappy and I think that is good. That helps us in our plan. It gives us some momentum thanks to the voters," Daniels said.

The governor remains optimistic that his plan for property tax relief coupled with recommendations handed down on Tuesday by the bipartisan State Tax and Financing Policy Commission will provide Hoosiers some real benefits in their pocketbooks.

Daniels said he got a sneak preview of the recommendations Monday and he noted, "I'm very pleased with it. It absolutely aligns with the main principals that I suggested."

Many of the commission's recommendations are based on Daniels' plan.

The governor wants to amend Indiana's constitution to include fixed caps on how much a homeowner or business could be charged. Residential property taxes would be constitutionally capped at 1 percent of a home's assessed value, rental properties at 2 percent and businesses at 3 percent.

"It will also lift several kinds of levies off of property tax completely, which I think is fair and is also another way to make it more permanent," he commented.

The commission also recommended that the sales tax be raised.

"They (the commission) believe that sales tax is the best way to deliver relief."

Daniels' plan would also increase the state sales tax to 7 cents, from the current 6 cents. It was last raised a penny in 2002 to provide property tax relief as it also was in 1972 and 1982.

The commission also called for a major overhaul of the assessment process.

"They are asking for one elected assessor in a county and taking all of the rest (of the township assessors) out," Daniels explained.

This will eliminate property assessment at the township level in all 92 counties in the state.

A key part of the commission's recommendations -- which the governor openly endorses -- is new and tighter controls on local spending.

"We can not fix this problem with property taxes if we don't fix that," Daniels said in matter-of-fact fashion sending a warning to local municipalities and school districts that changes in the way they have conducted business and spent taxpayers money is coming.

"In the end, I predict this will be the toughest thing to get across.

There is only one place that I know where nobody adds it up and that's local spending. In each county you have 20 or 30 taxing districts and everyone sets their own budget and there are some kinds of limits they are supposed to stay in, but there are lots of loopholes. So they set the budget where they want it and with what they can get away with and all of those 20 taxing districts are only brought together at your mailbox," he said. "At the newspapers, the radio stations and the families somebody adds it up and if the wish list is greater than the income, you set the priorities."

Daniels pointed out that each county currently has a property tax adjustment board -- made up of representatives from the various taxing districts.

"They have the power to add it up and say it looks like the total is too much. Today, they can opt-out. All I am proposing is they not be allowed to duck that duty," Daniels said, "There are a lot of ways to skin this cat, but I would suggest having a locally controlled, locally elected board have the responsibility to limit local spending to coincide with the growth in local income. If you are wondering why property taxes are too high, it's because the statewide average spending has been growing by seven or eight percent and Hoosier incomes are growing three to four percent. When that local spending grows faster than people's income and ability to pay taxes become unaffordable."

Daniels said his administration has proven that spending can be reduced because in the last three years it has decreased with 6 percent to two percent growth and he added, "The books are balanced."

The governor pointed out that some have suggested that the County

Council should have the ultimate responsibility for controlling this spending in each county.

Daniels said he just wants some elected body to have oversight over all local spending.

"The tax board exists today to me that looks like a good way to put the responsibility," he stressed.

The governor endorsed a plan that puts all major expenditures like construction of a school, library, fire station or any major capital projects to a referendum vote before the taxpayers.

"I think that's a good idea. The number one driver of high property taxes is high debt service on construction -- three-fourth of it is with schools. It's been growing faster than anything else and it's a lot bigger burden than it is in any other states," Daniels pointed out. "I think we ought to give the voters more direct say in that. But that's another thing that we will be debating (in the General Assembly). I think a voter referendum for significant projects is a pretty straight forward way to do it."

He continued, "Some would say if that happens, we'll never build another school. But I don't think you're giving the voters enough credit. If we try to build a gold-plated one you might get some back pressure and you should."

Currently, much of the spending and levy controls originate in Indianapolis with the State Department of Local Government Finance.

Daniels, who called himself a "home rule guy" said he doesn't like that kind of control.

"There are a lot of exceptions and loopholes in the system and there are a lot of tricks that lawyers have found around the controls on the borrowing and debt service side. That is how debt has ballooned in this state and it's way out of whack with other states. I like to create more local controls," Daniels stated. "Right now, I don't like a state industry trying to stop it when spending goes way up."

The governor pointed to Greene County -- a small county by population -- with five school districts and the associated administrative costs of operating those separate school districts as an example where money spent from property taxes could be saved if changes were made and a more centralized school administration was put into place.

"That's a lot of overhead," he replied.

Daniels suggested it might be the time to look at making state and local government leaner and reducing the number of taxing units.

"We have twice as many counties as they do in California which has six times as many people. We have more counties and school districts than places like Florida and Arizona. We elect more politicians than almost any state in America," Daniels said.

During the hour-long interview, Daniels said he is committed toward protecting homeownership in the state and says property tax relief must happen.

"I think homeownership is special. It's the core of the American dream and that is why I want to provide the most relief there. We are just not going to be a state where people save for years to own a home and then lose it because of an unfair property tax," he said. "My goal is to cut and cap property taxes."

Daniels said his plan makes sense and follows closely to the recommendations handed down by the commission.

"It (the commission's recommendations) are very closely paralleled to the plan I put out there, I'm very optimist about getting major changes made," Daniels said.

The legislature comes into session for a one-day Organization Day meeting on Nov. 20. House Speaker B. Patrick Bauer, D-South Bend, said Daniels' proposal will be introduced as a bill that day, paving the way for public hearings on the plan in December, before the legislature begins in earnest in January.

"I will say this is a very positive development," Daniels stated.

That's a good a start as any bill could ever hope for. I know there will be some changes. I could not have asked for more than to have this sort of general agreement on the direction and very even-handed treatment by the opposition party. There is no other plan out there. I do believe the basic outline -- immediate relief, long-term protection, local spending control, assessment reform will all be there in some fashion."

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